PRECIOUS-Gold edges up on euro zone fears, Fed stimulus hopes

Wed Mar 27, 2013 3:07pm EDT

* Italian debt auction, Cyprus' capital control weigh
    * Two top Fed officials: Bond purchases to last through 2013
    * Inverse correlation between gold, S&P strongest in 9 mths
    * Coming up: US real GDP, initial jobless claims Thursday

 (New throughout, adds graphic link, changes byline, dateline,
pvs LONDON)
    By Frank Tang
    NEW YORK, March 27 (Reuters) - Gold rose 0.5 percent on
Wednesday, snapping a three-day losing streak, as renewed euro
zone worries and hopes the Federal Reserve will continue its
loose monetary policy triggered bullion buying.
    The metal reversed earlier losses, as U.S. equities slipped
after soft demand at an Italian debt auction stirred fears about
the financial stability of the euro zone. 
    Also underpinning gold was a plan by Cyprus to restrict
capital flow as it tries to avert a run on its banks after
agreeing a tough rescue package with international lenders.
 
    Gold, however, was on track to rise around 1.7 percent in
March on resurgent safe-haven bids and hopes of a prolonged Fed
stimulus. It will mark the metal's first monthly gain after it
had posted losses in the last five months. 
    "While March seems to have been a month for moderation of
economic activity, our view remains one of improving global
growth. We believe these recent trends are likely to reverse,
leading to modest weakness in gold," said Robert Haworth, senior
investment strategist at U.S. Bank Wealth Management.
    Spot gold rose 0.5 percent to $1,606 an ounce by 2:29
p.m. EDT (1829 GMT), breaking three consecutive sessions of
losses. 
    U.S. gold futures for April delivery settled up
$10.50 at $1,606.20, with trading volume about 20 percent above
its 250-day average, preliminary Reuters data showed. 
    Higher turnover was partly because of the April-June
contract rollover ahead of April's first-notice day on Thursday.
    Investors favored gold and sold equities on Wednesday after
data showed contracts to buy previously owned U.S. homes fell in
February, held back by a shortage of properties. 
    The 25-day inverse correlation between gold and the S&P 500
index strengthened to a negative 0.5 on Wednesday, their
strongest link since June 2012, Reuters data showed.
    (Graphic showing inverse link between gold and the S&P 500
index: link.reuters.com/zeb96t)
    The metal's inflation-hedge appeal also received a boost
after two top Fed policymakers said the U.S. central bank should
continue its bullion-friendly bond-purchases at least through
2013.  
    Silver inched up 0.1 percent to $28.73 an ounce.
    
    THIN TRADING AHEAD
    Precious metals trading was expected to thin ahead of the
Good Friday holiday when most major markets will be shut.
    Liquidity should return next week, when a European Central
Bank policy meeting and the U.S. non-farm payrolls report will
be the main economic events. 
    Reflecting the stalled momentum in gold, holdings of SPDR
Gold Trust, the world's largest gold-backed
exchange-traded fund, were unchanged for a third session on
Tuesday after record monthly outflow in February.
    Platinum group metals investor now digested news the world's
two biggest platinum producers, Russia and South Africa, have
agreed to join forces to cope with an excess supply of the
metal. 
    Platinum and palladium also faltered. Platinum edged
up 0.2 percent to $1,578 an ounce, while palladium 
climbed 0.9 percent to $767.
    
 2:29 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1606.20  10.50   0.7  1590.30 1608.10   47,974
 US Silver MAY  28.612 -0.067  -0.2   28.080  28.785   43,236
 US Plat APR   1579.80  13.80   0.9  1567.70 1582.00    4,477
 US Pall JUN    768.30   6.90   0.9   754.50  771.50    2,818
                                                              
 Gold          1606.00   7.41   0.5  1591.83 1608.00         
 Silver         28.730  0.020   0.1   28.140  28.800
 Platinum      1578.00   3.50   0.2  1571.00 1580.00
 Palladium      767.00   6.50   0.9   756.50  768.00
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        205,972   201,664   172,729        13    0.51
 US Silver       46,582    58,882    52,077     18.61   -1.27
 US Platinum     14,591    15,706    11,735     14.97   -0.02
 US Palladium     2,834     7,840     5,219                  
                                                              
       

 (Additional reporting by Clara Denina in London; Editing by Jan
Harvey, Alison Birrane and Marguerita Choy)